Pros and Cons of Establishing an Overseas Subsidiary in Singapore A In-Depth Analysis

How to Establish an Overseas Subsidiary in Singapore A Comprehensive Analysis of Benefits and Challenges

In recent years, as the global business environment continues to evolve and internationalization accelerates, more and more Chinese companies are choosing to go global in search of new growth opportunities. As one of Asia’s most competitive business hubs, Singapore has become a top destination for enterprises setting up overseas subsidiaries due to its strategic location, stable policy environment, efficient financial system, and well-developed legal framework.

According to a 2025 report by People's Daily, Singapore has consistently ranked high in global business environment indexes and serves as a key foothold for Chinese investment in Southeast Asia. Particularly since the implementation of the Regional Comprehensive Economic Partnership RCEP, Singapore’s role as a regional trade center has been further solidified. Understanding the procedures, advantages, and potential challenges of establishing a subsidiary in Singapore is therefore crucial for Chinese companies aiming to expand into international markets.

Why Singapore Is a Popular Investment Destination

Strategically located at the heart of Southeast Asia, Singapore acts as a vital bridge between Eastern and Western markets. The country boasts world-class port and airport infrastructure, facilitating efficient logistics and supply chain management. It maintains an open attitude toward foreign businesses, with a simple and transparent tax system. The corporate income tax rate is only 17%, and newly established companies benefit from tax exemptions on profits for their first three years.

According to data released by Enterprise Singapore in 2025, over 600 foreign companies set up regional headquarters in the country that year, with an increasing share coming from China. This trend underscores Singapore’s growing importance as a regional operational hub for multinational corporations in the Asia-Pacific region.

Key Steps to Establishing a Subsidiary in Singapore

1. Determine Company Structure

When registering a company in Singapore, businesses can choose among a wholly-owned subsidiary, joint venture, or representative office. Among these, a wholly-owned subsidiary is the most common and independent structure, possessing legal person status and capable of bearing legal liability independently.

2. Company Name Approval and Registration

The proposed company name must be submitted to the Accounting and Corporate Regulatory Authority ACRA for approval. Once approved, the registration process-including drafting the company constitution, submitting shareholder and director information-can typically be completed within 1-2 working days.

3. Open a Bank Account

After incorporation, the company needs to establish a local bank account. While foreign-owned entities are permitted to open local accounts, some banks impose strict requirements on non-resident companies. It is advisable to prepare supporting documents in advance and communicate directly with the bank.

4. Apply for Necessary Licenses and Certifications

Depending on the nature of the business, specific industry licenses may be required. For example, sectors such as finance, education, and healthcare are regulated by specialized authorities.

5. Tax Registration and Compliance Reporting

All registered companies must complete tax registration within the prescribed timeframe and conduct annual financial audits and tax filings. Singapore follows a territorial tax system, taxing only income earned within the country.

Key Advantages of Setting Up a Subsidiary in Singapore

1. Favorable Tax Incentives

Singapore is known for its low tax rates and extensive network of tax treaties. To date, it has signed over 80 double taxation avoidance agreements, significantly reducing cross-border tax burdens. Qualified start-ups may also enjoy tax exemption on the first SGD 300,000 of taxable income.

2. Highly Liberalized Business Environment

Singapore encourages foreign direct investment and streamlines administrative procedures. According to the World Bank’s Ease of Doing Business Index, Singapore consistently ranks among the top globally, reflecting its high administrative efficiency and strong rule of law.

3. Rich Talent Pool and Language-Cultural Compatibility

With English, Mandarin, Malay, and Tamil as official languages, communication with both Chinese and international businesses is seamless. Additionally, Singapore’s universities produce a steady supply of highly skilled professionals, offering robust human resource support.

4. Ease of Access to Financing

As a leading global financial center, Singapore provides a mature capital market and diverse financing options. Whether through bank loans, bond issuance, or venture capital, companies can relatively easily access funding.

Challenges and Mitigation Strategies

Despite its many attractions, setting up a subsidiary in Singapore presents several challenges

1. Higher Operating Costs

Compared to other Southeast Asian countries, Singapore has higher labor and rental costs, which can be a challenge for startups or budget-constrained firms. Companies may consider remote work arrangements or shared office spaces to reduce expenses.

2. Intense Competition

Although the local market is small, it hosts numerous global brands, resulting in fierce competition. Thorough market research and a clear positioning strategy highlighting unique competitive advantages are essential before entry.

3. Strict Compliance Requirements

Singapore enforces stringent compliance standards, particularly regarding financial reporting, anti-money laundering AML, and data protection. Companies should implement robust internal controls and consider engaging professional service providers for compliance support.

4. Cultural Differences and Local Adaptation

Despite its multicultural society, Singapore has distinct consumer preferences and business etiquette. Companies should adopt localized marketing and team-building strategies to enhance brand awareness and employee engagement.

Conclusion

With its outstanding business environment, favorable tax policies, and strategic geographical position, Singapore offers a compelling option for Chinese companies seeking to establish overseas subsidiaries. However, prior to making any investment decision, companies must thoroughly assess their own capabilities and market demands, and develop a sound investment and operational plan. Only by fully understanding local regulations, cultural nuances, and market dynamics can enterprises successfully achieve their global expansion goals and navigate the wave of globalization with confidence.